This is the VOA Special English Economics Report.
recession may be easing, but American states are still feeling the pain. Most
of the fifty states began their budget year July first. Almost all states
require balanced budgets. Already, some predict new deficits.
Congress included state aid in the
two-year stimulus plan approved in February. But states have had to find other
ways to fill budget holes.
The recession has hit especially hard in California,
home of the world's eighth largest economy and one out of eight Americans.
On Tuesday, Governor Arnold Schwarzenegger signed a new
budget to solve his state's deficit. But spending cuts in the eighty-five
billion dollar budget might still not be enough to solve long-term problems.
This was what Governor Schwarzenegger said last week
when he proudly announced a deal with lawmakers.
ARNOLD SCHWARZENEGGER: "The budget that would have
no tax increases, a budget that is cutting spending -- we deal with the entire
twenty-six billion dollar deficit, around fifteen billion dollars in cuts that
we are making."
was in addition to fifteen billion in cuts passed in February.
the Republican governor angered some Democrats when he vetoed several additional
spending items before he signed the budget. The money will be held as an
emergency reserve. The governor himself compared the budget to the old Western
movie "The Good, the Bad and the Ugly."
Education faces the biggest reductions. Prisons and
health care also face big cuts.
finances have become so bad, this month the state began to buy goods and
services with promises to pay later. Now, California has a budget. The state
can seek loans to pay its bills until more tax money comes in later this year.
California also has the lowest credit rating of any state. All of the rating
agencies still rate California as worthy of investment. However, downgrades
have increased its borrowing costs.
people blame Californians themselves for the current troubles of the Golden
State. There is debate over "budget by ballot" -- putting tax
questions to popular votes. Voters in the last few years, and most recently in
May, have rejected several ballot measures that would have raised taxes.
California may rewrite its tax system. The state
depends heavily on income tax. But those revenues fall sharply in bad economic
Critics say even with the budget agreement, California
is still in trouble. They say some of the cost cuts are simply accounting
tricks that cannot be repeated next year.
that's the VOA Special English Economics Report, written by Mario Ritter. I'm Steve Ember.